Chinese FDI into Canada slowing down
Chinese foreign direct investment (FDI) into Canada has decreased over the past year, said Paul Ferley, assistant chief economist at the Royal Bank of Canada (RBC), the largest bank in Canada.
Ferley spoke on Wednesday at a briefing on the outlook for the US and Canadian economies, and the impact of China, with a group of Chinese-Canadian media representatives and real estate professionals.
“Over the past five years, Chinese foreign direct investment flows into Canada have increased by over $10 billion,” said Ferley. “We are now seeing a softening of that, with a slight decrease from this time last years.”
While Chinese FDI into Canada has leveled off in dollar terms, Canadian FDI into China continues to rise, Ferley said.
Ferley also addressed Canada’s soaring housing market, especially foreign ownership of newly constructed condominiums in Toronto and Vancouver, which have risen by 7.4 percent and 6 percent respectively since 2010.
According to Ferley, China is by far Canada’s second-largest partner in bilateral trade, and is second only to the US in both imports from and exports to China. The volume of trade increased in 2015, due to rising Canadian imports from China.
The top Canadian exports to China are resource-based goods, such as machinery and equipment. The top Chinese exports to Canada are electrical products and machinery and, to a lesser extent, consumer goods.
China’s relative importance as a trading partner varies significantly across the provinces, though the largest two- way flow remains British Columbia.
Regarding the RMB vs the Canadian dollar, Ferley said that Canadian interest rates are expected to rise slightly in contrast with a projected cut in China.
The projected change in interest rates is expected to result in the Chinese yuan depreciating relative to the US dollar, while the Canadian dollar is expected to appreciate modestly next year, which implies sizable depreciation of the Chinese yuan relative to the Canadian dollar.
Donna O’Reilly, RBC regional vicepresident of commercial banking for
Greater Toronto, said that the special economic briefing is a way to celebrate the strong economic and social bonds between Canada and the Chinese community.
“Our country is shaped by the more than 1 million people of Chinese descent who have made Canada home over the years,” O’Reilly said. “Whether it’s serving new Canadians or members of the community who’ve been here for generations, we’re honoured to have provided financial advice to the Chinese-Canadian community for almost 90 years.”
Paul Ferley, assistant chief economist of the Royal Bank of Canada